Update No: 260 - (29/08/02)

Ukraine is not in the news right now, but that is not so surprising. Journalists are muzzled there and are apt to disappear if they get too inquisitive about the doings of the elite. President Kuchma and his cronies prefer the appearance of a quiet life.

Succession looms
Beneath the surface things may well be astir, with key figures in the elite jockeying for the succession to Kuchma, who is nearing the end of his second term, constitutionally his last. His premier, Anatoly Kinakh, is certainly a prime contender, Kuchma himself having exchanged the premiership for the presidency in 1994. Kinakh as founder of the Party of Industrialists and Entrepreneurs, the bosses party in the Duma, is well positioned as the establishment candidate. The mayors and local potentates will see to it that he gets top attention from the media and a fervent support at the polls.
A maverick candidate with establishment connections all the same is ex-premier, Victor Yushchenko, indeed Kinakh's predecessor, who once headed the national bank. The fact that he was removed by parliament last summer will do him no harm with the voting public who are not over-fond of the politicians, indeed regard them as a pack of crooks. A previous premier to Yushchenko, Pavel Lazarenko, in exile after absconding with millions, is facing charges in the US for fraud. The standard-bearer of a new course, Mrs. Timoshenko, is under the cloud that she was corrupt as head of the national gas grid, a charge she denies.
The mystery is why any of the population vote for the establishment politicians, given they are so disenchanted with them. A fatalism has people in its grip, a conviction that there is noting they can do about anything to improve their lives. Apart from the two or three per cent at the top and perhaps another three to five per cent professional people, the vast majority are very poor, and not rarely destitute. 

The economy grows
The one bright spot is that after crashing with the Russian economy in 1998-99 the economy is growing. GDP went up by 7.3% in 2000 and over 5% in 2001, a figure unlikely to be reached, however, this year. The rebound, facilitated by devaluation, coincided with the premiership of Yushenko, who is the most popular figure in the spotlight.
He has scrupulously refused to criticise the president who abandoned him to his fate last year. Maybe he sees a possibility that Kuchma could yet turn to him again as a quid pro quo for immunity from prosecution for rigging previous elections and other misdemeanours, including the disappearance of awkward journalists. Or Yushchenko may be thinking of standing on a common platform with Kinakh, supporting him for president in exchange for a promise of the premiership and eventual succession to the presidency. Or maybe Yushchenko is just keeping all his options open.
Whatever the case, it looks as if either him or Kinakh will be president by 2004, with the other as his premier. Such would suit many in the establishment and that is why it is likely to happen. 

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AUTOMOBILES

32% duty on import of Russian cars for 4 months

Ukraine is to impose a 32 per cent duty on the import of Russian cars for four months, Interfax News Agency quoted a source in the Russian Economic Development Ministry as saying. There is no official information regarding this decision on the date that the duty will be introduced, the source added. "Ukraine's actions are astonishing," he said.
"The consultations we have carried out so far show that there are no economic reasons behind such actions, moreover the production of this type of automobile in Russia is virtually non-existent." Ukrainian authorities will in this way punish their own consumers, the source said.
Russia may respond with measures if the government commission on protective measures in foreign trade and customs-tariff policy received an official request from Russian carmakers. An unofficial request has already been made because Russian carmakers believe the government subsidises auto production in Ukraine.
Ukraine's actions would contradict the free trade agreement with Russia, which envisages such measures but only after the corresponding procedures and proof of the loss to the Ukrainian economy, which so far has not happened. Russia exports up to 70,000 cars a year to Ukraine.

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AVIATION & SPACE

Government to develop new generation launch vehicle

The Ukrainian government has approved a decision to start development of the new Cyclone-4 launch vehicle, Interfax News Agency has quoted the head of the Ukrainian State Commission for the Defence Industry complex, Volodymyr Horbulin, as saying. He noted that the rocket would form the core of a joint Ukrainian-Brazilian project. Ukraine is responsible for the launch vehicle, while Brazil will build the necessary infrastructure at its Alcantar space centre.
The Cyclone-4 will be built on the basis of the Cyclone-3. Horbulin said Cyclone-3 is one of the most reliable launch vehicles in the world (115 of its 120 launches were successful). He said the new launch vehicle would have good technical parameters, in particular concerning the altitude of orbit. In addition, its payload will give the Cyclone-4 significant advantages over current medium launch vehicles. Horbulin said the size of the joint project is estimated at US$180m, with Ukraine's share at US$90m. Development is expected to be funded mainly from the state coffers, but private investments may also be attracted, he added.
Horbulin was also confident that six years after its introduction, with an average of six launches a year, all spending on development would be paid back. If Cyclone-4 is used for 10 years, Ukraine's receipts may total about US$2bn, and profits US$240-260m.

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DEFENCE INDUSTRY

Ukraine to sell optical equipment for tanks to Pakistan

Ukraine is expanding its technological presence on Pakistan's market of armoured hardware, Interfax-Ukraine News Agency has reported.
Under a recently signed contract, the Cherkasy-based Fotoprylad scientific and industrial company will supply Pakistan with optical instruments to repair gun sights on [Ukrainian-made] T-80 and T-84 tanks, sources in the military-industrial company have told Interfax-Ukraine. The contract's worth has not been announced.

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ENERGY

Ukrainian premier rules out privatisation of gas transportation system

Ukrainian Prime Minister, Anatoliy Kinakh, said on 3rd August that no company or organization that would form a consortium to run the Ukrainian cross-country gas main should have a monopoly influence, ITAR-TASS News Agency has reported.
"Ukraine is not considering the possibility of privatising the state gas transportation system at the moment. That means the form of ownership is not going to change," Kinakh said in an interview with the Ukrainian press.
Kinakh noted that the Ukrainian government would see that the consortium was created in full compliance with national laws with a long-term legal perspective, given the fact that this process will affect all areas of Ukraine's activities starting from diversification of fuel and energy supplies and the filling of the state budget to provision of fuel and energy resources to the welfare sector.
"We've already had our first exchange of views with the Russians. We've held a meeting of a working group jointly with the parliament's profile committee and we are waiting for proposals from our German partners," Kinakh went on to say.
A contract for setting up a consortium to run and develop the Ukrainian gas transportation system should be passed by Ukraine's parliament, the prime minister said.
The Ukrainian and Russian presidents, as well as the German federal chancellor agreed to create an international consortium to run and develop Ukraine's gas transportation network at a meeting in St Petersburg in June 2002. The consortium may also be joined by other European countries.

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FOREIGN INVESTMENT

Russia to invest in energy and transport industries of Ukraine 

Russia is going to invest in the energy and the transport industries of the Ukrainian economy and in its agriculture, stated the deputy chairman of the State Duma committee for CIS affairs, Vyacheslav Igrunov, who was also chairman of the board of the International Business Forum, after the meeting with the Prime Minister of Ukraine, Anatoly Kinakh, the UFS news agency reported.
According to him, this year one could observe a considerable increase in investments in the Ukrainian economy. Russians believe that this trend will be preserved. At the same time, Igrunov pointed out that both countries "are making a significant leap forward in lifting barriers for investments" within the Year of Russia in Ukraine and the Year of Ukraine in Russia. According to the deputy, consortiums in various industries can be created to reach this goal, which will contribute to gaining profits from bilateral collaboration. As Igrunov pointed out, the Russian and Ukrainian industries have so far put "inadequate competition" into western markets, inflicting losses to each other.

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FINANCIAL NEWS

World Bank mission satisfied with Ukraine's performance

Ukraine is "close to meeting" the World Bank's requirements for releasing the second tranche of the Programme Adjustment Loan, the head of the World Bank mission to Ukraine, Gregory Jedrzejczak, told a news conference in Kiev on 30th July, Interfax-Ukraine News Agency has reported.
Jedrzejczak stressed the importance of an agreement between the World Bank and Ukraine on the restructuring of Oshchadbank [Savings Bank]. He said that an agreement was reached to draft a financial recovery programme for Oshchadbank with the participation of the National Bank of Ukraine.
Oshchadbank's restructuring is one of the main requirements for Ukraine to obtain the second tranche of the Programme Adjustment Loan.

Ukrainian premier reports 32m tonnes of grain harvested

Ukraine reported a positive socio-economic results in July, Ukrainian Prime Minister, Anatoliy Kinakh has said. According to Kinakh, state budget receipts were 4 per cent above target in July, Ukrainian Television has reported. 
Pavlo Vlasov reported for the TV station that budget receipts were 100m hryvnyas above target in July. This has helped to pay wages on time and in full. Other social payments have been made as well.
Kinakh said: "Agriculture producers have made a notable contribution to this result. They have already harvested 32m tonnes of grain despite bad weather, and we can now say for sure that the state will have bread. Budget receipts have also been significantly boosted recently by the ever increasing potential of Ukraine's domestic market and the increasing purchasing power of Ukrainian citizens. Ukraine's retail trade turnover rose by 16 per cent in the past six months."
According to the government, work is under way to protect Ukraine's national economic interests. Structural changes are continuing in industry. Priority is being given to such industries as machine building and the food industry. Major attention is being paid to protecting the interests of domestic producers.
Kinakh added: "A crackdown on smuggling, on the illegal import of goods which Ukrainian companies produce and on the shadow economy is important for a further boost in budget receipts."
Summing up July budget receipts, the prime minister said that current socio-economic trends make it possible to continue boosting the competitiveness of the Ukrainian economy, which will help raise Ukrainian citizens' standard of living accordingly.

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FOREIGN ECONOMIC RELATIONS

Iraq seeks technologies in exchange for oil

Iraq needs Ukrainian technologies and hardware, while Ukraine needs Iraqi oil, Interfax News Agency quoted Iraqi charge d'affaires in Ukraine, Hisham Ibragim, as saying on July 15th.
These would involve peaceful technologies enabling Iraq to rebuild oil wells and infrastructure that were constructed some time ago with Soviet aid, he said. The Iraqi leaders know that Ukraine wants stronger bilateral ties, Ibragim said. This was evident at the second meeting of the Ukrainian-Iraqi cooperation commission held at the deputy prime ministerial meeting in Kiev in July, he said.
The first such meeting was held in Baghdad in May 2001. The two nations signed a bilateral protocol in cooperation in various fields, in particular in trade, finance, oil production and refining, construction, communications and culture. Ibragim hopes the implementation of the protocol will start as early as this year. Turnover of goods between the two countries was US$300m last year, the Iraqi Embassy reports.

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NUCLEAR ENERGY

Ukrainian plant makes container for dry storage of used nuclear fuel

The Zaporizhzhya nuclear power plant's non-standard equipment and pipeline plant has manufactured a test container for dry storage of used nuclear fuel, the plant reports on its site, Interfax News Agency has reported.
The plant is prepared to start manufacturing such containers on a regular basis and is clearing documentation with the research institutions that support it. The plant is also cooperating with Duke Engineering and Services in the transfer of technology and obtaining a licence for manufacturing the containers. The plant intends to make eleven containers by the end of the year.
The plant wants to make containers first and foremost for the Zaporizhzhya station, and later for all Ukrainian nuclear power stations.
Similar containers are not made in Ukraine at the moment. The plant's production line for manufacturing the containers was commissioned on 19th May 2000. A container can store used fuel for 50 years, after which it must be processed or buried.

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